9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (5) TMI 581 - AT - IBCWithdrawal of consent by Financial Creditor to a resolution plan after its approval by the Committee of Creditors (CoC) but before the approval by the Adjudicating Authority under Section 30(6) of the Insolvency and Bankruptcy Code 2016 - direction for liquidation of corporate debtor - HELD THAT - Apparently the decision of Respondent No. 2 defies commercial wisdom and probably for this reason no other financial creditor had supported its position qua the withdrawal of consent. Admittedly the resolution plan offered a resolution value of Rs. 77.98 Cr whereas the Liquidation Value of the Corporate Debtor was Rs. 23.45 Cr as per the valuation report. Further the subject Girgaon property is valued at only Rs. 90 lacs which was only 1.5% of the resolution value and the appellants had already offered to replace the said property and to file a fixed deposit receipt of Rs. 1 crore to justify its capacity to honour the resolution value. Therefore it makes commercial sense to proceed with the resolution plan rather than to liquidate the Corporate Debtor. The facts prima facie does not suggest any intention to defraud the respondents as admittedly the Appellant had a registered sale deed to substantiate his title over the subject property. Can there be an allegation of malafide intent especially when the subject property has been mortgaged with Respondent No. 2/SBI since 2014 itself and regular title search was taking place. Even the SBI was not aware of the alleged title dispute which has been fraudulently created by the erstwhile vendor(s) of the flat apparently purchased legally by Appellant No. 3. The impugned order shows the ld. NCLT did not adjudicate upon allegations of fraud made by the Respondent No. 2/SBI against the Appellants and gave no notice to the appellants and further no reasons are given by the ld. NCLT to send the Corporate Debtor to liquidation. Further certain issues viz. (a) Whether liquidation could have been ordered by Ld. Adjudicating Authority at the instance of Financial Creditor without any formal application by the Resolution Professional and/or without an approval by the Committee of Creditors; and (b) Whether the Financial Creditor can withdraw its consent given to Resolution Plan pending its approval by the Ld. Adjudicating Authority; The Law discussed in EBIX Singapore Pvt Ltd Vs. Committee of Creditors of Educomp Solutions and others 2022(2) SCC 401; Express Resorts and Hotels Ltd Vs Amit Jain and others 2021 (9) TMI 672 - SUPREME COURT ; Deccan Value Investors LP and Another Vs Dinkar Venkatasubranian and Another 2024 (4) TMI 569 - SC ORDER was never discussed or adjudicated upon by Ld. Adjudicating Authority. Matter remanded to the Ld. Adjudicating Authority to look into the issues above and to decide the matter afresh through a reasoned order - petition allowed by way of remand.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal include:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Can a Financial Creditor Unilaterally Withdraw Consent to a Resolution Plan Pending Approval by the Adjudicating Authority? Relevant Legal Framework and Precedents: The Code mandates that a resolution plan approved by the CoC is to be submitted to the Adjudicating Authority under Section 30(6) for approval. The question of withdrawal of consent by a financial creditor post-CoC approval but pre-NCLT approval has been considered in precedents such as EBIX Singapore Pvt Ltd Vs. Committee of Creditors of Educomp Solutions and others (2022), Express Resorts and Hotels Ltd Vs Amit Jain and others (2023), and Deccan Value Investors LP Vs Dinkar Venkatasubranian (2024). These cases discuss the binding nature of CoC decisions and the limited scope for individual financial creditors to withdraw consent unilaterally after CoC approval. Court's Interpretation and Reasoning: The Tribunal noted that the Adjudicating Authority did not discuss or adjudicate these legal principles. The unilateral withdrawal by Respondent No. 2/SBI, unsupported by other financial creditors and without formal application, was found to be contrary to commercial wisdom and the established legal framework. Key Evidence and Findings: The CoC had approved the resolution plan with 98.15% majority, and only Respondent No. 2/SBI sought to withdraw consent. No formal application was filed by the other consortium banks (Union Bank of India and Bank of India) to support the withdrawal. Application of Law to Facts: The Tribunal found no justification in law or fact for permitting unilateral withdrawal of consent by a financial creditor after CoC approval. The NCLT's acceptance of such withdrawal without a formal application or hearing was erroneous. Treatment of Competing Arguments: The Respondent No. 2/SBI argued fraud and title issues to justify withdrawal. However, the Tribunal observed that these allegations were not adjudicated by the NCLT and that the unilateral withdrawal was not supported by other creditors. Conclusion: The Tribunal held that unilateral withdrawal of consent by a financial creditor post-CoC approval but pre-NCLT approval is impermissible without proper adjudication and formal application. Issue 2: Whether the NCLT was Justified in Rejecting the Resolution Plan and Ordering Liquidation Solely on the Basis of Alleged Fraud Without Notice or Adjudication Relevant Legal Framework and Precedents: Principles of natural justice require that parties be given an opportunity to be heard before adverse orders are passed. Under the Code, the Adjudicating Authority must consider objections and allegations carefully and provide reasoned orders. Court's Interpretation and Reasoning: The Tribunal found the impugned order to be a non-speaking order lacking any reasoning or findings on the fraud allegations. The appellants were not given notice or opportunity to respond to the allegations made by Respondent No. 2/SBI. Key Evidence and Findings: The appellants had produced a registered sale deed from 2014 establishing title to the disputed Girgaon property. The alleged fraudulent sale deed executed by the vendors in 2020 was the subject of ongoing civil and criminal proceedings initiated by the appellants. The property was mortgaged with the consortium banks since 2014, and regular title searches were conducted without objection. Application of Law to Facts: The Tribunal emphasized that the NCLT erred in rejecting the plan without adjudicating the fraud allegations or issuing notice to the appellants, thereby violating principles of natural justice. Treatment of Competing Arguments: The Respondent No. 2/SBI relied solely on the alleged title dispute to object, but the Tribunal noted that the value of the disputed property was only 1.5% of the resolution value and the appellants had offered alternatives to secure the amount. Conclusion: The rejection of the resolution plan and direction for liquidation without hearing the appellants or providing reasons was unjustified and contrary to natural justice. Issue 3: Whether Liquidation Could Have Been Ordered by the NCLT Without a Formal Application by the RP or CoC Approval Relevant Legal Framework and Precedents: Section 33(2) of the Code provides for liquidation of the corporate debtor on certain grounds, but the procedure requires a formal application and consideration of the CoC's position. The RP is generally the applicant for approval or rejection of resolution plans. Court's Interpretation and Reasoning: The Tribunal observed that the NCLT passed the liquidation order without any application under Section 33(2) by the RP or CoC approval. The order was based solely on the statement of Respondent No. 2/SBI without formal pleadings or hearing. Key Evidence and Findings: No formal application to withdraw consent was filed by the consortium banks except SBI's statement. The RP did not initiate any application for liquidation. The CoC had overwhelmingly approved the resolution plan. Application of Law to Facts: The Tribunal found that the NCLT's direction for liquidation was procedurally improper and premature. Treatment of Competing Arguments: The Respondent No. 2/SBI's insistence on liquidation was not supported by other stakeholders or procedural compliance. Conclusion: Liquidation could not be ordered in the absence of a formal application and proper procedure under the Code. Issue 4: Validity of Alleged Fraud Concerning Title to the Girgaon Property and Its Impact on the Resolution Plan Relevant Legal Framework and Precedents: Fraud allegations require adjudication based on evidence. Mere allegations without adjudication cannot justify rejection of a resolution plan. The value and materiality of the disputed asset in the resolution plan are relevant considerations. Court's Interpretation and Reasoning: The Tribunal noted that the Girgaon property was only one of five properties offered as a source of funds, valued at Rs. 90 lacs (1.5% of the resolution value). The appellants had a registered sale deed from 2014 and had initiated civil and criminal proceedings against the vendors for fraudulent sale deeds executed in 2020. Key Evidence and Findings: The property was mortgaged with the consortium banks since 2014, with regular title verification. The alleged fraudulent sale deed was created after the appellants' purchase and was unknown to the banks at the time of the resolution plan. Application of Law to Facts: The Tribunal found no prima facie evidence of mala fide intent or fraud on the appellants' part. The appellants' offer to replace the property or provide a fixed deposit further demonstrated good faith. Treatment of Competing Arguments: The Respondent No. 2/SBI's objection was based solely on the alleged title dispute, which was not substantiated by adjudication or evidence before the NCLT. Conclusion: The alleged fraud concerning the Girgaon property did not justify rejection of the resolution plan. Issue 5: Compliance with Principles of Natural Justice and Adequacy of Reasoning in the Impugned Order Relevant Legal Framework and Precedents: Orders affecting rights must be supported by reasons and must comply with principles of natural justice, including the right to be heard. Court's Interpretation and Reasoning: The Tribunal held that the impugned order was non-speaking, failed to provide reasons for rejection, and did not afford the appellants an opportunity to respond to allegations. Key Evidence and Findings: The appellants were not parties before the NCLT and were not served notice. The NCLT accepted Respondent No. 2/SBI's statement without independent inquiry or hearing. Application of Law to Facts: The Tribunal found this to be a clear violation of natural justice and procedural fairness. Treatment of Competing Arguments: No justification was offered by the NCLT for the procedural lapses. Conclusion: The impugned order was legally unsustainable on grounds of natural justice and adequacy of reasoning. 3. SIGNIFICANT HOLDINGS The Tribunal set aside the impugned order and remanded the matter to the Adjudicating Authority for fresh consideration, emphasizing the following principles:
The Tribunal directed the Adjudicating Authority to take an independent view uninfluenced by its observations and to decide the matter expeditiously within eight weeks.
|
